Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 54
the recipient. A household that is truly in need of food would most likely prefer not to
trade the vouchers for cash. It is the individuals that falsely make themselves eligible for
the program or non-autonomous agents (i.e. alcoholics or drug addicts) that can be
expected to engage in trafficking.
Although the USDA oversees the retail outlets that are participating in the program, it
remains difficult to measure the precise extent of abuse and fraud within the FSP One
USDA official told Time Magazine in 1982 that “the [food stamp] coupons are a second
currency. Anything that you can buy with money… you can buy with food stamps.” 68
Although this may be an exaggeration, it is plausible to expect that some individuals will
be willing to exchange food stamps for less than face value cash payments. Again, the
trade-off in trying to reduce such illegal behaviour is the additional cost of doing so. In
terms of efficiency, the government must assess the costs of prevention versus the costs
of non-prevention. Preventative measures, such as putting the recipient through a
rigorous eligibility determination process or stricter authorization guidelines for retail
stores, result not only in higher administrative costs but also may reduce participation
rates and accessibility.
Notwithstanding the overall authorization process, Robert A.Moffitt notes that there
are over 200,000 participating retail outlets in the United States. 69 The large number of
authorized outlets indicates that the process is not very restrictive with regards to
supermarkets and convenience stores. Given the large monthly payouts to recipients, the
supply-side enjoys significant benefits from the FSP only if they are not cash equivalent.
However, based on data collected in 1987, the USDA estimated that a reduction in the
FSP by $1 billion would lead to a loss of 25,000 jobs. 70 Thus, suppliers have a vested
interest in the continuance of the FSP.
The value of the voucher
Once a household qualifies for assistance, the value of the food stamps granted is a
function of net income. Net income is calculated by deducting expenses such as medical
(for elderly and disabled only) and dependent care (if an adult member is working or
training and has children) from gross income. 71 The program assumes that the
participating household will devote 30 percent of this “net income” to food purchases.
The monetary difference between the expected contribution by the recipient and the
government-determined cost of purchasing a “nutritionally adequate low-cost diet” given
the household size establishes the precise value of the food stamps. 72 Embedded within
such a structure is an upper limit or cap on benefits received. For example, a household
with an income of zero will receive the maximum level of benefits based on the cost of
an adequate diet but no more. The maximum benefit, however, varies according to
household size and is adjusted annually for changes in the benchmark diet. In 1995, a
single-person household was eligible for a maximum of $115 of coupons per month. 73
For a household of eight, the corresponding benefit was $695. 74
An important element of the FSP is that the unit of focus is not the individual but the
household. The maximum allowable benefit increases as the number of family members
increases; however, this increase is not proportional. Each member of a family of four,
for instance, does not receive the amount that a single-member household would receive.
While at first glance this might seem inconsistent with horizontal equity—the system